Divestment has become a trillion-dollar topic in recent years – boycotting companies considered harmful has never been more popular: Israeli exporters, arms makers, and fossil fuel producers, among others.

Across the world more than 800 institutions, with total investments valued at $6tn, have committed to divest from fossil fuels.

But where do investors put their money instead? Are companies that benefit thriving? In short, is ethical investing making a difference?

Definitions of this sector vary, as do monikers – ethical, environmental, sustainable. But they can be broadly categorised as “socially responsible investment”, or SRI.

Among the many estimates of the power of private investment, the most plausible is that this kind of investment jumped to 10% of private funds under management in recent years, after slumming along at long-term levels of below 4%.

Institutional investors are also getting in on the act: two decades ago about £300m a year was considered “socially responsible” investment; today it is, by one estimate £23bn.

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And yet this is still a drop in the ocean compared to all global funds under management, estimated at about $85tn (£60tn).

Green bond issues are expected to double this year, but will still be less than one percent of the global bond market.

Despite being comprehensively overshadowed by conventional investment, however, there is sober but considerable optimism about the future of SRI.

British artists KennardPhillipps’ image of a girl in an-oil covered landscape. Photograph: KennardPhillipps/Greenpeace

Proactive investors – and the wider public conscience – are pushing governments, and in turn regulators, to demand better practices from business – cleaner air, less obesity, reducing use of fossil fuels.

Institutions too are heading in the same direction: nearly 80% of investors across 30 countries told last year’s Schroders’ Global Investor Study that sustainability had become more important to them over the last five years.

“While profitability remains the central investment consideration, interest in sustainability is increasing,” said Jessica Ground, Schroders’ global head of stewardship. “But investors also see sustainability and profits as intertwined.”

UBS’s Doing well by doing good report claims more than half the UK public would pay more for goods or services with a conscience. Many more people will want better ethical standards, even if they don’t want or can’t afford to pay for them.

“It’s in my upbringing: you treat others in the way you’d like to be treated,” says Hughes.

More active financial investors are also taking the issues seriously. Several have indices to track the value of shares in companies which are not doing ‘bad’, or actively doing ‘good’. One is Morgan Stanley, whose two environmental, social and governance (ESG) indices – also covering weapons and women’s progress – were worth $62bn by last summer.

UBS reckons “impact investing” – where investors actively seek out companies doing good – is a “force to be reckoned with”.

One of the key reasons is the other big driver of the sector: shareholders no longer have to choose between their conscience and profits. Hughes’s £170,000 increased in value by 26% last year – notably more than conventional investments.

“It started driven by values, it’s now definitely [driven] by value,” says Simon Howard, chief executive of the UK Sustainable Investment Forum. While Richard Mattison, CEO of environmental data firm Trucost, says investors such as pension funds now see such investments as a “no brainer”.

Is this sea-change having any effect on the issues that investors want to improve?

Shareholders and the wider public have won many causes in recent years – reductions in unsustainable palm oil, reduced packaging, new coal plants ditched, high street shops such as Sports Direct embarrassed over treatment of workers.

Activists decorate King’s College London with flowers and signs calling for divestment from fossil fuels. Photograph: Alamy Stock Photo

But some of the biggest winners on the stock markets last year were bêtes noires of ethical investors – tobacco, car makers and aerospace and defence companies. Energy stocks have risen by one third in the last two years. And in November 2017 scientists revealed global carbon dioxide emissions, which drive climate change, reached a record high.

However, ever-rising demand to invest in companies pioneering and popularising technologies to create carbon-free energy, reduce waste landfill sites, reduce aircraft noise and other improvements to living standards, should make a considerable difference over time.

At the same time, existing companies, across the spectrum, from manufacturers to media, are being forced – by regulators, investors and public opinion – to reconsider how they will do business in 10 or 20 years’ time, especially with regard to carbon emissions.

“This is going to reverberate across every part of the economy,” says Andy Howard, Schroders’ head of sustainable research. “This is going to be painful for some [but] there are big opportunities for people who get it right.”

In the meantime, says Hughes: “If I’m investing into a company that’s helping the environment, or helping women, I’m happy with that. That’s all you can ask of anyone.”

This article is part of a series on possible solutions to some of the world’s most stubborn problems. What else should we cover? Email us at theupside@theguardian.com